– New service enables clearing of the $275bn a day FX options market, with other physically settled FX products to follow
– Bringing capital efficiency to the FX markets
– Planned launch in 2016, subject to regulatory approval
LCH.Clearnet Ltd, a leading multi-asset clearing house, announced that ForexClear and CLS are jointly developing a service to enable physical settlement of cleared foreign exchange (FX) products. The new initiative will enhance the confidence, risk management and efficiency of the world’s largest financial marketplace, by providing participants the access to, and the benefits of, the full range of clearing services.
The settlement service, which will be operated by CLS, is targeted to launch in 2016, subject to regulatory approval, with the intention to expand to cover other FX products in line with demand. The new service follows ForexClear’s launch of FX NDF clearing in 2012.
Gavin Wells, Global Head of ForexClear, said: “This collaboration will provide a great opportunity for the FX marketplace to enhance its risk management and capital efficiencies, which are already driving increased demand for FX clearing. As a result, by providing access to compression and netting services in the $275bn a day FX options market this strategic initiative is playing a broader role in the industry-wide adoption of OTC clearing.”
David Puth, CEO of CLS, said: “This is an important milestone in the continued development and safeguarding of the global foreign exchange market. We look forward to working in partnership with LCH.Clearnet, which is ideally placed to develop this service.
We have been working with the CCP community and other industry stakeholders to design and model the most effective way to mitigate settlement risk for cleared FX products. Settlement risk is one of the most significant risks in FX. Our priority is to mitigate this risk, while increasing operational efficiency through our technology and connectivity.”
